Millennials and credit: They have the right idea

Given that we endure month after month of cold temperatures and dark days in our Canadian climate, it’s no big surprise when we want to let loose during the short summer months to really take advantage of the season. Summertime is a notorious budget-buster; with the justification of the short time span, lure of fun summer activities and the length of the oncoming winter many opt to cast their budgets aside.

A recent study by BMO shows though that, while the temptation of summer spending lingers for all Canadians, the levels at which people have indulged in this spending vary. Some highlights from the survey include:

Thirty-eight per cent of respondents (regardless of age) indicated that it was hard to stay on track with their budgets during the summer months.

According to the survey on millennials and credit, millennials are the generation that have good spending and savings habits the most deeply engrained. Despite a willingness to overindulge during the summer months, the majority (56 per cent) indicate that they feel guilty about over spending.

Millennials are clearly taking lessons about good credit management to heart. The survey indicates millennials carry on average $2000 in debt, which is significantly lower than the Baby Boomer and Echo generations.

For millennials who will indulge in credit over the summer, 27 per cent intend to pay their balances off in full when they receive their bill; only 18 per cent of other generations intend to do the same.

“With household debt at record levels, it is encouraging to see younger generations embracing some of the fundamental lessons of good money management during a notorious spending season. Responsible money management isn’t overly complicated (set a budget, live a cash lifestyle and live within your means); however, with the abundant opportunities and social pressures to buy-now, pay later, these money lessons seem less relevant,” says Jeff Schwartz, executive director, Consolidated Credit Counseling Services of Canada.

“The key for the younger generations to keep this momentum going is to commit to these good habits and other ones too- like setting savings goals for the short, long and medium term,” says Schwartz.

Here are some ideas on how to keep those good habits going forward.

Debt lessons have been learned

Another point that the survey reveals is how millennials are getting some of the psychological lessons around credit use and spending beyond their means. They understand the long term implications of impulse spending; they also understand the financial dangers of maxing out credit cards, with only the ability to pay minimum payments.

Rejecting the buy-now, pay-whenever mentality is a major step in the right direction, especially when you consider that this generation is poised to enter life stages where you accumulate much of your debt (home buying, early in your career, building a family).

Double duty credit

The survey also shows another shrewd financial move that millennials are making. If they are going to use credit, they are making a conscious choice to use cards that offer rewards points. Using rewards programs is a smart way to stretch your dollars further, by paying for merchandise, experiences or travel expenses, all often expenses that fall outside the traditional budget.

Have you blown your budget off this summer, but would like to rein in your spending before it gets out of hand? We can help you get organized. Call one of our trained credit counsellors at or visit our free online debt analysis.

Here are some basic guidelines to help you create a budget by percentage of income and figure out the right budget percentages and a starting point. Remember that based on your individual living style, income, family circumstances, and location, the allocation may vary from person to person...Read full article

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